European banks seek £20bn capital

Of the 91 banks tested, seven failed, including five from Spain, and another 17 barely passed the European Union tests which have been widely criticised as not demanding enough.

The tests were aimed partly at opening the door to funding markets for a batch of southern European banks and lowering costs for other lenders.

Analysts said it would make sense for banks to raise the capital they would have needed had the test criteria been tougher.

Ian Henderson, who runs a global financials fund for JP Morgan, said: "Those that are at the margin may as well raise equity to dampen down fears ... The sums of money involved are really relatively small."

Results announced on Friday showed the seven that failed need to raise 3.5bn euros ($4.5bn), but this was far less than expected.

But if the minimum pass mark had been set at a Tier 1 capital ratio of eight per cent, rather than six per cent, banks would have needed an extra 27bn euros ($35bn), analysts estimated.

Meanwhile, the Spanish Confederation of Savings Banks said its smaller regional savings banks would be able to raise capital this year if needed, as it started a roadshow in London aimed at reassuring investors.

Confederation managing director Jorge Gil said : "The raising of the equity should be in the coming months, it should be pretty quick."